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Transportation revenues available to the Commonwealth today include the gas tax, tolls, Registry of
Motor Vehicle fees, and a portion of the state sales tax. These sources are increasingly unreliable,
unable to keep pace with the true funding needs of the transportation system, and inequitable in
both their collection and their allocation. The state tax on gasoline has not increased since 1991.
Because gas taxes are a fixed value – 21 cents per gallon in Massachusetts – rather than a percentage
of the overall sale, the Commonwealth receives no additional financial benefit when the price of
gas increases. Furthermore, inflation has diminished the value of the state’s gas tax. So, while
construction and operating costs have consistently increased over the past 22 years, the main funding
mechanism for supporting transportation projects has remained static. This dynamic has significantly
reduced the buying power of the gas tax. Additionally, after decades of significant increases in fuel
consumption, the past decade has seen fuel consumption in the Commonwealth stagnate. While this
has environmental benefits, it points to the decreasing value of the gas tax as a long-term means of
funding the Massachusetts transportation system.
The funding MassDOT
has historically relied on,
such as the motor fuels
tax, is becoming more
unreliable and is limiting
the opportunities to
invest in our system.
Decline in Purchasing Power from State Motor Fuels Tax
power of the $0.21
1991 tax in 2012
dollars is $0.12.
Unreliable – The state motor fuels taxes is no longer
providing the same purchasing power due to inflationary
pressures on this critical source of revenue. Coupled with
increases in fuel efficiency, the gas tax is not funding the
transportation system to the degree that it did in the past.
While tolls and other user fees are an important source of transportation funding in the Commonwealth,
they are also problematic in a variety of ways. Their use is limited and encumbered by various discount
programs and other restrictions that have been implemented over the years. In addition, a portion of
our toll revenues are currently scheduled to be eliminated in 2017, which will cause MassDOT to lose
an average $120 million a year in revenue. User fees inconsistently applied also raise equity concerns,
particularly the use of roadway toll revenue to fund the construction and debt costs associated with the
Central Artery project. Transportation costs should be shared equitably across all users of our system,
not borne disproportionally or arbitrarily by one mode, one region of the Commonwealth, or one subset
The MBTA relies heavily on a portion of the Commonwealth sales tax to fund its operations and debt-
service payments, but sales tax revenue projections made more than a decade ago when the Legislature
voted to ‘forward fund’ the MBTA have never materialized. Due to the growth of online retail, two major
recessions, and other factors, sales tax collections in the Commonwealth have grown by only 1% per year
since 2000, not the 3% originally anticipated. As of 2009, this has resulted in a $460-million gap between
anticipated and actual sales tax revenue for the MBTA.
Furthermore, while the federal government has historically provided substantial funding for the
Commonwealth’s transportation program, federal funding is becoming less dependable than it once was.
Over the past year, in the 17 Your Vision, Our Future forums held by MassDOT, as well as other statewide
transportation events hosted by the Metropolitan Area Planning Council, the Conservation Law Foundation,
A Better City, the Pioneer Valley Planning Association, the Dukakis Center for Urban & Regional Policy, and
MassINC, a number of options and recommendations for raising new revenues have been proposed by
the public and municipal leaders.
The recommendations and an initial analysis of each is below. To meet our $1 billion average annual
investment need, MassDOT and the Legislature should consider these and other revenue options.
Commonwealth Payroll Tax
According to Moving Forward with Funding: New Strategies to Support Transportation and Balanced
Regional Economic Growth, published by MassINC in 2011: “A 0.16 percent payroll tax would provide
revenue in the range needed to close the MBTA’s annual operating deficit ($140 million to $207 million,
depending on how the tax is levied in overlapping RTA districts). This 0.16 percent payroll tax would cost
the median full-time worker in the MBTA service area just $1.77 per week. In RTA service districts, a payroll
tax at this rate would generate nearly $100 million in revenue...at a cost of approximately $1.50 per week to
the median full-time worker in RTA districts.” A payroll tax would be a new tax in the Commonwealth that
employers would pay on the wages of their employees.
Massachusetts has in
the past substantially
relied on federal
but that source is less
reliable now. Where
the federal government
is helping less, the
Commonwealth has to
pick up slack.
Based on growth
for the South Coast Rail
and Land Use Corridor
of the commuter rail
line will result in an
additional 3,800 jobs.
Motor Fuels Taxes
The current tax of 21 cents was last increased in 1991. Only 14 states have lower per-mile fuel taxes than
does Massachusetts, making our fuel tax one of the cheapest in the U.S. Increasing the gas tax by one cent
per gallon would yield $32 million per year. To raise $1 billion, consumers would need to pay an additional
thirty cents per gallon, resulting in a total gas tax of 51 cents per gallon, which would be the highest in the
nation. The Commonwealth could also index the fuel tax to inflation and/or other adjustments in the price
of gas, which would allow the Commonwealth to benefit from increases in the per-gallon cost of gas.
State Sales Tax
To raise an additional $1 billion in sales tax in calendar year 2013, the sales tax rate would need to increase
from the current 6.25 percent to 7.75 percent.
To raise $1 billion in the personal income tax paid by residents of the Commonwealth in CY2013, the
existing income tax rate would have to be increased from 5.25% to approximately 5.66%. This would be
approximately an 8% increase over the existing income tax rate.
Under a ‘green fee,’ existing vehicle registration and title fees would be assessed additional fees based
on a vehicle’s level of carbon emissions. Under a green fee scenario, owners of motorcycles and hybrid
cars could pay an extra $15 every two years for registrations, car and hybrid SUV owners could pay an
additional $30 every two years, SUV and light truck owners could pay an additional $60, and heavy truck
owners could pay an additional $85. The fee would be adjusted to reflect the age of the vehicle and the
anticipated emissions produced – higher polluting vehicles would pay more, while cleaner vehicles would
Vehicle Miles Traveled Tax
A 2.4 cents-per-mile fee on vehicle miles traveled would produce $1 billion in annual revenue. The fee
could be collected at a vehicle’s annual safety inspection or through an onboard device that would record
miles travelled but protect user privacy by not collecting location information.
Routine, Regular Increases in Fees, Fares, and Tolls
Some experts recommend shifting the burden of funding transportation services from broad-based taxes to
specific user fees in order to more clearly draw a connection between cost and use. To accomplish this over
the next decade, MassDOT could enact a series of modest, regular increases to transportation fares, fees,
and tolls to keep pace with the cost of inflation. MBTA fares could increase 5% every two years beginning
in FY2015, yielding an estimated $145 million in cumulative new revenues by 2023. Tolls could increase
5% every other year beginning in FY2015, resulting in $84 million in new annual revenues by FY2023.
*New York State has a 4.0% statewide tax
while counties can also tax; figure is for
Albany & Rensselaer Counties
Fuels TaxYear Last
Motor Fuels Taxes
For services provided by the Registry of Motor Vehicles, a 10% fee increase every five years beginning in
FY2018 would result in $54 million in new annual revenues.
New Tolling Mechanisms
MassDOT could introduce new tolling mechanisms to support state road maintenance or expansion, local
roadway improvements, or public transit expansion. This could be done through dedicating existing toll
revenue differently than it is done today, implementing high-occupancy/express lane tolls (so-called “HOT”
lane tolling), developing congestion pricing policies, or introducing tolls on new facilities such as I-93,
I-95, or I-84 as a way to fund ongoing maintenance and capacity improvements. In order to implement
innovative toll concepts on interstates other than I-90, MassDOT would need approval from the Federal
Western Turnpike Tolls
Tolls currently collected on the Western Turnpike generate nearly $120 million in annual revenue. Eliminating
these tolls when the bonds on the Western Turnpike reach maturity in 2017, as is currently mandated,
would greatly constrain MassDOT’s ability to continue to maintain the Western Turnpike in its current
condition, and would exacerbate inequities on the roadway. The financial analysis discussed throughout
this document, therefore, assumes that the revenue generated by the Western Turnpike tolls will continue
to be available to MassDOT after 2017. MassDOT proposes maintaining tolls on the Western Turnpike in
order to continue to dedicate sufficient resources to this important corridor, and to use a portion of those
tolls for transportation projects off the Turnpike in the region in which they were collected (for example,
dedicating a portion of tolls collected west of Sturbridge to transportation improvements on the Turnpike
as well as locally in the Pioneer Valley and/or the Berkshires). This change will require legislative approval.
While the financial
picture is grim, it is
important to note that
the MBTA is too valuable
an economic asset
to permit its further
deterioration or even
collapse. A robust
system provides vital
economic and quality-of-
life benefits to residents
from all walks of life and
to businesses in the
communities it serves.
- MBTA Review 2009
Downtowns in the
were not designed
cars. These areas
have the potential to
become thriving urban
centers, but like larger
downtowns, they need
frequent and predictable
- MassINC. 2011
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